"It is the purpose of this title to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information in accordance with the requirements of this title."

In the words of the U.S. Congress, the preceeding paragraph is the purpose of the Fair Credit Reporting Act (FCRA). In summary, the Fair Credit Reporting Act was created to help protect Americans against unjust practices within the credit reporting system.

While the mission of the FCRA is a noble one, a quick survey of today's credit systems shows the results have fallen well short of expectations. What follows is how the Fair Credit Reporting Act has been unsuccessful in producing a just credit system for consumers.

Detailing the Shortcomings of the Consumer Credit Reporting System

1. Accuracy - It's well documented that credit reports contain inaccuracies but it is worth repeating. Recent studies show that almost 80 of all credit reports contain errors such as the same listing added more than once, incorrect dates, tradelines added to the wrong credit reports, and positive credit accounts that are not included.
   
   These studies also indicate that 1 in 4 credit reports include errors large enough to cause a credit denial.
   
   How just is a credit system that can cause a person to be declined for a loan or force them to pay higher interest rates than are necessary based on their actual credit risk? True, you can dispute these inaccurate listings with the credit bureaus, but this chore is rarely easy or foolproof. Depending on the types of the erroneous items on your credit reports, fixing your credit can be a maddening event you are forced into.


2. Relevancy - While they do not say it directly, the Experian, Equifax, and TransUnion's creation of the VantageScore is evidence enough that the current FICO credit scoring models are not as relevant as they could be. According to Experian spokesman Donald Girard, the VantageScore is "the most sophisticated, highly predictive scoring model that's available in the marketplace" and as a consequence the more popular FICO score is less so.
   
   One of the flaws in the FICO score that the VantageScore tried to address is the importance that old credit listings have on the credit score. According to Dr. Bonnie Guiton Hill, advisor to President Bush on consumer affairs, "it is our understanding that computer models that predict credit worthiness find most information that is more than two years old nonessential." This is why newly created scoring models are starting to ignore credit listings that are over three years old. It does not serve to accurately predict credit worthiness.
   
   So why have lenders been so reluctant to accept credit scoring models such as the VantageScore? They say it is because FICO is engrained in the credit system. A more cynical answer is that these lenders are unmotivated to sacrifice the huge profits they make from charging higher interest on credit provided to people who are actually a low credit risk.


3. Proper Utilization - Given how common it is for a credit score to be a gross misrepresentation of a person's true credit risk, the point could be made that the popularity of credit scores in the financial market is improper. , the use of credit scores goes beyond deciding loan amounts and interest rates.
   
   Employers, landlords, insurance companies and others may request to see your credit reports. In today's society your ability to get a certain job, rent an apartment, or get approvedqualify for reasonable insurance premium can all be dependent on your credit score.
   
   Improper is a subjective word, but being passed over for a job because of irrelevant and potentially inaccurate negative credit items in your credit files that are input into a flawed credit scoring formula to produce a credit rating that is not indicative of your actual credit risk fits the bill.